Euro zone production jumps more than expected in Dec as economy powers on

BRUSSELS (Reuters) - Euro zone industrial production jumped more than expected in December, data from the EU statistics office Eurostat showed on Wednesday, underlining the fastest economic growth rate in a decade that economists expect to continue in 2018.

Eurostat said industrial production in the 19 countries sharing the euro rose 0.4 percent month-on-month for a 5.2 percent year-on-year gain. Economists polled by Reuters had expected a 0.2 percent monthly and 4.2 percent annual rise.

“The acceleration of production growth is unlikely to be a one-off as the outlook for industry remains rosy,” said Bert Colijn, senior euro zone economist at ING bank.

“Given the current backlog of work in industry, it is no surprise that hiring and investment in capital goods are high on the list of businesses. This adds to the strong economic picture for the start of 2018,” he said.

The statistics office also confirmed its earlier preliminary estimate of gross domestic product growth in the euro zone in the last three months of 2017 at 0.6 percent quarter-on-quarter and 2.7 percent against the same period of 2016.

“Looking ahead, surveys suggest that the region’s upturn will gather pace,” said Stephen Brown, European economist at Capital Economics. “We expect the euro zone’s upturn to match last year’s strong pace in 2018, with annual GDP growth of 2.5 percent.”

UPSWING SEEN CONTINUING

The GDP of Germany, the euro zone’s biggest economy, grew 0.6 percent on the quarter and 2.9 percent year-on-year in the fourth quarter, with France at 0.6 percent and 2.4 percent respectively and Spain at 0.7 and 3.1 percent respectively.

“For the year 2018 as a whole, a strong increase of 2.5 percent is still likely, even if the statisticians have slightly revised previous data downwards,” Joerg Kraemer, chief economist at Commerzbank, said in a note on Germany.

“We continue to believe that the upswing could continue for another two or three years despite the roll-back of labor market reforms because cyclical tensions on the labor market are not yet in sight,” he said.

Eurostat also revised upwards November production figures to 1.3 percent month-on-month from 1.0 percent and to 3.7 percent year-on-year from 3.2 percent.

The production surge was fueled by durable consumer goods such as refrigerators and TV sets, the output of which jumped 2.7 percent on the month in December and was 7.4 percent higher than a year earlier.

The output of intermediate goods — like parts for their production — jumped 1.4 percent for a 6.6 percent annual gain.

The production of capital goods rose 7.6 percent year-on-year in December, accelerating from 6.7 percent in the previous month, indicating that investment was picking up too.